By Fitch Solutions
- South Korea’s gas-fired power generation will replace coal to be the dominant power type in the market’s power mix in the middle of the decade, as momentum for the sector’s growth strengthens.
- The incumbent Yoon administration is committed to increasing nuclear power’s share in the power mix, though we expect the realisation of such plans to be limited by policymaking headwinds.
- Non-hydropower renewables will experience strongest growth in its sector’s contribution to South Korea’s electricity supply despite indications of lowering the sector’s targets.
South Korea’s gas-fired power generation will replace coal to be the dominant power type in the market’s power mix in the middle of the decade, as the momentum for the sector’s growth strengthens. Over the coming years, we expect South Korea’s coal power sector to shrink gradually as the market pivots to other sources of power, which are less carbon-intensive. Notably, the market will strengthen its gas power sector with the commissioning of gas-fired power plants over the short term. This follows the commissioning of the 1GW Yeoju Complex Power Station in 2022 and our expectation that the first 571MW unit of the Eumseong Combined-Cycle Power Plant will come online in about 2024. Earlier in December 2021, liquefied natural gas power generation was included in the market’s K-Taxonomy, which is the classification of economic activities that the government deems green. This is an example of the direction that the previous administration led by then-President Moon Jae-In was working toward, and we expect this momentum to continue through the incumbent Yoon administration. Underpinning this expectation is the current government’s draft revision that proposes a slight increase in gas-fired power’s role in the power mix. The revision proposes that South Korea should target 20.9% of 2030’s generation mix to come from gas-fired power, instead of the currently targeted 19.5%. With continued support for the gas-fired power sector and the paring back of coal-fired power generation, we forecast gas to be the dominant fossil fuel type in South Korea by the end of 2025, at 30.5% share of the power mix. This is slightly above coal’s share of about 30.3% in our forecasts.
Gas To Overtake Coal, Overall Conventional Thermal Capacity Stagnates
South Korea – Coal & Gas Power Generation, TWh & Conventional Thermal Capacity, GW
The incumbent Yoon administration is committed to increasing nuclear power’s share in the power mix, though we expect the realisation of such plans to be limited by policy-making headwinds. With the election of Yoon Suk-Yeol as the president of South Korea, his administration has been pushing for the reversal of the previous administration’s nuclear power phase-out plans. Since Yoon assumed office in May 2022, his administration has been proposing the comeback of nuclear in South Korea’s power market. These movements include the September 2022 revised draft to include nuclear research and development (R&D), demonstration projects, and small modular reactors into the K-Taxonomy. In August 2022, the energy ministry also proposed that the target of nuclear’s share in 2030’s power mix be revised from 23.9% to 32.8%. However, these policy movements have yet to be finalised, and policy-making headwinds will present challenges for the Yoon administration to roll out strong nuclear expansion plans as the main opposition Democratic Party retains the majority in the National Assembly. We expect concrete developments in the nuclear power sector to come from power plants that are in the pipeline, such as the Shin Hanul 1 and 2 reactors, and the Shin Kori 3 and 4 reactors. We have yet to include the Shin Hanul 3 and 4 reactors in our forecast despite announcements from the Ministry of Trade, Industry and Energy that it has set out plans for the resumption of work on those reactors. Overall, nuclear power generation will expand from an estimated 155TWh in end-2022 to 171TWh in 2032, supported by existing nuclear power plants in construction.
Nuclear Power Generation Growth Limited To Few Reactors
South Korea – Nuclear Power Generation, TWh & % chg y-o-y
Non-hydropower renewables will experience the strongest growth in its sector’s contribution to South Korea’s electricity supply despite indications of lowering the sector’s targets. The government has indicated intentions to remove the target of renewables to make up 70% of 2050’s power mix and revise down 2030’s target from 30.2% to 21.5%. We believe that this does not reflect an abatement of support for renewables, but a tapering down of highly ambitious plans, especially since ramping up nuclear power is back in focus. We believe that South Korea’s non-hydropower renewables sector will experience the largest growth rates of all power types over the coming 10 years. The sector’s installed capacity will increase from an estimated 25GW in end-2022 to 46GW in 2032, at an annual average rate of 6.3%. The bulk of the sector’s capacity growth will come from solar photovoltaic (PV) installations, which we estimate to be about 12GW from 2023 to 2032. This will mainly come from rooftop PV and large-scale PV project tenders launched by the Korea Energy Agency. The wind power sector will also experience an expansion in its onshore wind sector, though to a lesser extent than solar PV, as it faces headwinds from limited land availability and public opposition to land use change for large-scale onshore wind. This will drive the growth of the offshore wind sector, with strong upside risks for the sector given South Korea’s extensive coastal regions and increasing investor interest. Supporting this is the 28GW worth of offshore wind power projects in the market’s pipeline according to our Key Projects Database as of January 2023.
Solar PV Outshines Other Renewables
South Korea – Non-Hydropower Renewables Capacity By Type, GW
This article has been sourced from Fitch Solutions and can be accessed here